To set aside or to not set aside? Responding to a claimant’s discontinuances as part of a fraud strategy

A claimant is entitled to discontinue court proceedings at any point. That is their prerogative. However, when they do, the rules provide the presumption that a claimant who does is liable for the defendant’s costs up to the date of the discontinuance. If the case is subject to qualified one-way costs shifting (QOCS), it stops a defendant from enforcing the costs order. A defendant is therefore left with the costs of defending the claim however there are several routes of action that can be taken, which are as follows:

1. No further action
2. Apply to set aside the Notice of Discontinuance and strike out the claim
3. Apply to the court for a finding of fundamental dishonesty.

Option 1 – no further action

Most cases that discontinue should not be pursued further. The claimant is protected by QOCS. Whilst the timing of a discontinuance can be frustrating, this is not grounds to seek to disapply QOCS, which will apply unless there are good reasons for it not to, for example due to significant procedural irregularities or evidence of fundamental dishonesty as discussed below.

Option 2 – set aside and strike out

Whilst this may seem a little bit like the ‘hokey cokey’, a defendant can apply to set aside a discontinuance within 28 days of it being served in order to pursue an exemption to QOCS pursuant to CPR 44.15. Such an application should be combined with one to strike out the claim under CPR 3.4 (court’s case management powers), which is what triggers this exemption.

As setting aside a discontinuance carries the risk of breathing life back into an action, the combined strike out seeks to mitigate against the risk of the court setting aside the discontinuance and the proceedings becoming live again.

Cases where this approach may be appropriate include:

• The claimant discontinuing to avoid an application hearing where specific disclosure is sought, or where the defendant has applied to strike out the claim
• The claimant discontinuing to avoid providing disclosure of relevant and self-incriminating evidence.
  
  

Option 3 - fundamental dishonesty

The defendant can apply to the court for a finding that the claim was fundamentally dishonest, without setting aside the Notice of Discontinuance. This provides a QOCS exemption pursuant to CPR 44.16.

The decision to pursue such an application requires careful assessment of the evidence and allegations levied.

The application following a discontinuance needs to establish a prima facie case of dishonesty that is deemed fundamental to the claim. This is different from the perspective of fundamental dishonesty in s.57 Criminal Justice & Courts Act 2015, which considers the actions of the claimant.

The defendant needs to fully evidence their allegations so there can be no suggestion of an ambush at the final hearing and the claimant cannot hide behind ignorance when they fail to fully respond or provide evidence.

In our experience, most applications will be opposed. Where they are not, the courts consider the issues carefully. Therefore, careful consideration should be given to the quality of the evidence and the allegations made. Can that potentially dynamite piece of social media evidence be explained away? Can you verify the evidence by alternative means? It is important to remain objective.

Cases where this approach may be appropriate include:

• The claimant discontinuing to avoid providing disclosure suspected to be harmful to their case
• The defendant having positive evidence that the claim is fraudulent.
  
  

Comment

The decision to take positive steps to secure enforceable costs should be taken quickly and with due consideration, factoring in additional costs. In reality, most claims discontinue because the claimant has reassessed the merits of their claim and felt the claim too risky to pursue to final hearing. This, however, should not be assumed and we would recommend reviewing the case and evidence carefully upon receipt of discontinuance.

Notwithstanding the notes of caution, we have found the court receptive to applications from defendants and would recommend taking positive steps to secure an enforceable costs order wherever possible.

Getting this right is a valuable and effective part of your fraud deterrence strategies.

Read other items in Motor Brief - January 2019

Related items:

• Balancing the prejudice: pursuing fundamental dishonesty without the defendant
• Kennedys secures first authoritative court guidance on ‘fundamental dishonesty’ in PI claims